The SAEE: who was right?

Bryan Caplan argues that economists mostly agree with one another, compared to the general public, and reports results from the Survey of Americans and Economists on the Economy (SAEE):

The leading correlates of economists’ disagreement are political-ideology and, to a lesser extent, party affiliation. Liberal Democratic and conservative Republican economists disagree in expected ways about taxes, regulation, excessive profits and executive pay, and some employment-related issues. Conservative economists are also markedly more optimistic about the country’s economic future. Note, however, that there is little evidence of an ideological divide over the economy’s past or present performance. Economists
across the political spectrum can largely agree about the path of inequality, real income, and real wages over the past two decades.

I don’t find agreement about the past very comforting: the point of economic advice is to deliver good consequences in the future. However, I would point out that disagreements about predictions are an opportunity for retrospective assessment. Indeed, when Bryan’s paper was published, in 2002, the 5 year timeline of the predictions had already come and gone. But there’s nothing stopping us from checking now. [Note, I prepared this post up until this point with the intention of posting it before peeking at the data.] Results below the fold.

Over the next five years, do you think the average American’s standard of living will rise, or fall, or stay about the same?

Rise

Fall

Stay the same

No
opinion

General Public

24

29

46

2

Economists

50

8

41

1

US median household income (inflation-adjusted) rose over the next 5 years, as predicted by the economists, and especially the conservative economists. [ETA: as did median personal income.] After the period of the prediction, household median income peaked in 2007, and is today slightly lower than it was in 1996. [ETA: median personal income is slightly higher, HT Todd Kuipers.]

A single data point provides little evidence, but if someone collected a substantial time series of such predictions it could be very helpful in assessing the degree to which different ideologies’ empirical elements are “reality-based.” Perhaps funding for such a project could be raised from overconfident ideologues of rival factions each hoping, ex ante, to prove their ideologies’ superiority.

GD Star Ratinga WordPress rating system

Trackback URL:

Todd Kuipers

Households are not people. Household size is shrinking over time. The comparison is different enough that using the same numbers from your source and doing a personal income calc: average inflation adjusted personal income has risen from 19067 to 19457 since 1996.

Not so much to prove the rise, but that when choosing to make a point about predictions, it’s good to ensure that you’re calculating from the same basis.

Doug

“[I]f someone collected a substantial time series of such predictions it could be very helpful in assessing the degree to which different ideologies’ empirical elements are reality-based. ”
This runs into the problem that economists not only make predictions but also influence policy which helps change those predictions. It’s pretty hard to tell whether a side got their predictions right or simply won more political power in the ensuing timeframe.

For example the Club of Rome predicts that economic growth will be highly negative over the coming century. If the Club of Rome managed to gain complete control over economic policy, I too am sure that we’ll have negative economic growth.

http://overcomingbias.com RobinHanson

If you understand the economy as well as economists but don’t have their political power, you can predict that they will get their way and be as accurate as they are. Lack of power is not an excuse for lack of accuracy.

http://www.gwern.net/ gwern

As well, if economists really can deliver the results they ideologically want to happen – that’s really important to know!

Frank White

I’d say it’s even more important than just them making accurate predictions.

Pat McGee

This result requires that you trust several different data sources. I personally distrust the CPI. My view of the world is that Shadow Government Statistics [http://www.shadowstats.com/] is closer to my experience. Williams claims that true inflation is close to 3 points higher than the CPI. Adding 300 basis points to the inflation adjustment results in the General Public being closer to right than the economists.

VV

Perhaps funding for such a project could be raised from overconfident ideologues of rival factions each hoping, ex ante, to prove their ideologies’ superiority.

Unlikely. Ideologues appeal to emotions, not to reasoned analysis of empirical data.

IMASBA

I would like to point out that in 1996 (most) republicans still acknowledged scientific principles and didn’t refer to the democratic president as “that radical Muslim Marxist”, with an emphasis on his middle name. A study in 2013 would likely show quite different results.

Lord

Assuming some reasonable width for stay the same, both were as accurate.

This is a blog on why we believe and do what we do, why we pretend otherwise, how we might do better, and what our descendants might do, if they don't all die.